Joseph Zambon
Targeting Key Programs and Policies
One of the most controversial Republican budget reconciliation proposals involves reversing key provisions of the Inflation Reduction Act (IRA), particularly those aimed at lowering prescription drug prices. The IRA, signed into law in 2022, was designed to save Medicare an estimated $20 billion over ten years by implementing price-setting mechanisms on innovative drugs. Rolling back these measures would hurt consumers by driving up drug costs, particularly seniors.
According to the Congressional Budget Office (CBO), the IRA’s drug pricing reforms were expected to provide substantial relief to middle-class families and retirees. By undoing these reforms, Republicans risk increasing financial pressures on people struggling with high healthcare expenses.
New York’s Federal Tax Imbalance
New York taxpayers contribute significantly more to federal coffers than they receive in return. On average, each New Yorker pays over $2,000 ($2,253, per capita balance of payments, 2022 according to the Rockefeller Institute) more in federal taxes than they get back. This shows that New York and other mainly blue states (California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, Nevada, Utah, Washington, and Wyoming) subsidize other states. In 2022, Kentucky, for example – Senate Majority Leader Mitch McConnell at the time – received over $30 billion dollars. That is $8,524 more for each Kentucky man, woman, and child than they send to the federal government.
The proposed budget reconciliation measures will worsen this imbalance. Instead of addressing the inequities in federal tax contributions, the proposals would direct more resources to recipient states. They will also benefit billionaires and corporations while leaving middle-class families in states like New York to shoulder a greater burden.
“Balance of payments” refers to the amount of federal spending distributed in a state minus the amount paid to the federal government by a state’s residents and businesses. States that pay more than they receive are orange. States that receive more than they pay in are blue, per capita for the 2022 year.
The State and Local Tax (SALT) Controversy
Before the last Trump administration, taxpayers could deduct local property and state income taxes from their federal tax returns. This was important for many New Yorkers and people in high-tax states. However, the 2017 Tax Cuts and Jobs Act (TCJA) capped SALT deductions at $10,000 on federal tax returns, effectively increasing federal taxes in high-tax states like New York.
Now, there are new budget reconciliation proposals that further erode SALT deductions or eliminate them entirely. If these are enacted, even more money will be transferred.
Senate Majority Leader Chuck Schumer called out these proposals on social media, writing, “Republican plans to make fat cats fatter just leaked.” Schumer later wrote, “In the fall, Donald Trump went to Long Island, New York, and claimed he would “get SALT back…But now instead of ensuring New Yorkers will get SALT back, the House Freedom Caucus want to impose a whole new round of SALT caps…I will do everything I can to remove the SALT cap tax…”
Budget Reconciliation Proposals
Among the budget reconciliation proposals under consideration are:
- Eliminate the SALT Deduction Entirely
- Make the $10,000 SALT Cap Permanent (although nothing is permanent)
- Restrict SALT to Property Taxes Only: This would eliminate deductions for state income and sales taxes and make property taxes the only allowable deduction under the $10,000 cap.
Additional Measures Targeting Middle-Class Families
The proposed budget reconciliation measures go beyond SALT deductions. The proposals would eliminate other middle-class tax benefits.
- Eliminate the Home Mortgage Interest Deduction: A move that would increase housing costs for homeowners everywhere. It would make home ownership unaffordable for many people.
- Reducing the Mortgage Deduction Cap -Lowering the cap from $750,000 to $500,000. That would hurt both prospective homeowners and existing homeowners with mortgages over $500,000.
- Eliminate the Child and Dependent Care Tax Credit: This tax credit, not a tax deduction, reduces a tax bill by up to $2,100 for childcare expenses.
Where Are New York’s Republican Representatives?
While these proposals threaten to drain New York taxpayers, Republican Representatives Nicholas Langworthy (NY-23) and Claudia Tenney (NY-24) are silent. Their districts include some of the state’s poorest rural areas, where federal funding is critical. Yet, they appear more focused on supporting their party than advocating for their constituents.
In stark contrast, Democratic Representative Tim Kennedy (NY-26) delivers federal funding to Buffalo and Western New York almost weekly. And he is just starting his first full term. Kennedy’s proactive approach shows the importance of strong representation in Congress, something Langworthy and Tenney seem unwilling or unable to provide.
The Stakes for New Yorkers
If the Republican budget reconciliation proposals are enacted, they will hurt New Yorkers and widen the state’s balance of payments gap. The proposals benefit low-tax states, wealthy individuals, and corporations at the expense of middle-class families.
New Yorkers must hold their representatives accountable. Republican representatives must do more to get New York’s fair share of federal money.